Marconi executives poised to share in £111m bonanza

An elite core of 50 top managers at Marconi, including Mike Parton, the chief executive, took a giant leap toward splitting a £111m bonus pool yesterday as the embattled telecoms group continued the radical surgery needed to nurse its way back to financial health.

The managers have become some of the fastest millionaires in British business, having signed up to the bonus plan only last May when the once proud Marconi was in the throes of desperate refinancing talks to save it from a humiliating collapse.

Mr Parton is now entitled to a personal bonus of £15m based on yesterday's closing price of 617p. However, this is expected to rise as further restructuring targets are achieved.

Yesterday the company announced the sale of its North American Access business, which provides high-speed communications services for corporate clients, to Advanced Fibre Communications of the US for $240m (£135m).

The deal will allow Marconi to complete the repayment of £300m of debt and reduce its annual interest bill by £20m.

However, the transaction also fulfils a key target set for management by the company's creditors last May when they agreed to rescue the business.

As part of the restructuring agreement, which converted the company's debt into shares, creditors put in place a series of management incentives based on achieving five specific targets. The new incentive packages required managers to give up their rights to cash bonuses but offered them potentially bigger future payouts in the form of Marconi shares. Yesterday's deal means that the management team have met four of the five targets and they are now entitled to receive 70 per cent of the total shares in their bonus pool.

At yesterday's closing price these shares were worth £78m. If the final target is reached ­ to achieve a market value for Marconi of £1.5bn ­ then the total share pool will be worth £111m at yesterday's closing price. The company's value last night was £1.2bn.

Mr Parton is entitled to 3.55 million shares under the incentive scheme and had satisfied the conditions relating to 2.45 million shares, giving him a personal bonus pot of £15.1m. He survived the cull of senior management brought about by the near collapse of Marconi, which accounted for the heads of Lord Simpson, the chief executive, and John Mayo, the finance director.

Mr Parton joined the Marconi board in April 2000, after the disastrous international expansion strategy was agreed by the board. However, the main acquisitions made as part of this strategy, Four Systems and Reltec of the US, which together cost $6.2bn, did form part of the business he was running for Marconi. Mr Parton and his fellow managers will not be able to get their hands on all of their new Marconi shares at once. Under the rules of the incentive scheme, the shares are awarded in different tranches. Managers will be able to take control of the first tranche of shares this May, with further awards being between then and August 2006.

Mr Parton said that the North American business Marconi was selling had been substantially improved by management over the past eight months. "We are delighted with this transaction. The purchase price reflects the business's strong technological heritage, solid customer base and significant operational performance improvements achieved over the past 12 months," he said.

Marconi shareholders welcomed the deal, marking the company's shares up 3.3 per cent to finish at 617p. Mr Parton repeated the company's guidance that it expected a slight increase in third-quarter sales compared with the £389m of sales in the second quarter.